Its share market newsletter said the BHP Billiton Mitsubishi Alliance should continue improving and extending its existing coal operations as an efficient way of enhancing shareholders’ returns.

“The investing of growth capital to develop long-term tier 1 type projects from within its own portfolio remains a priority for the company,” it stated.

“The development of brownfield projects in general requires less capital and can reach production swiftly.

“The capital cost saving effect and swift delivery of projects should ensure the generation of future sustainable shareholder returns from its growth pipeline.

“BHP in our view has the financial capability to deliver such returns across commodity cycles.”

BHP’s third-quarter 2013 production outcomes on the whole met guidance forecasts, according to Fat Prophets.

All the company’s operations reported improved production outcomes for the reported period.

Metallurgical coal production for the March 2013 quarter was higher compared to the March 2012 quarter, reporting a rise of 22.2%, to 8.97 million tonnes.

Production from the BMA mines for the reported period showed a significant improvement from the March quarter 2012 rising 26.1%, to 5.3Mt.

The March quarter 2012 production outcome was restrained by disruptions to operations caused by weather impacting the company’s Australian east coast mines while its Colombian operations suffered from industrial stoppage.

Australian operations for the reported period experienced a 10.2% fall on the same quarter for 2012, to 3.8Mt.

Colombian energy coal production fell 48.8% during the same period to 1.5Mt.

Turning to Rio Tinto, Fat Prophets said the company had a patchy March quarter but it was due to weather incidents in Queensland and operational issues such as the Kestrel extension longwall move.

Rio’s Australian thermal coal operations lifted output to 4.9Mt, up 19% on the corresponding 2012 quarter.

Rio Tinto Coal Mozambique (in which Rio Tinto has 65% interest) delivered 109,000t as the Benga mine was ramping up, compared to zero for the same quarter in 2012.

Coking coal output was lower by 3% on the same quarter in 2012, at 1.7Mt.

“Operational issues and weather drove the softer result,” Fat Prophets said.

Thermal coal output for 2013 is forecast at 21Mt.

Guidance for hard coking coal and semi-soft coking coal for 2013 is 8.5Mt and 4Mt respectively.